Nevada Geothermal Power Inc. (NGP.B, NGLPF.OB) and Ormat Nevada Inc., a subsidiary of Ormat Technologies Inc. (NYSE: ORA) have signed a letter agreement to jointly develop, construct, own and operate one or more geothermal power plants at the Crump Geyser Project Area located in Lake County, Oregon.
The parties will form a 50:50 joint venture company, Crump Geothermal Company LLC (CGC) to pursue the development.
The parties plan to start construction and drill at least one development well for the first power plant with an expected generation capacity of up to 30 MW in 2010 and to place the plant in service before the end of 2013 so as to qualify for the Treasury Cash Grant under Section 1603 of the American Recovery and Reinvestment Act (ARRA). The parties also intend to apply for a Department of Energy loan guarantee under Section 1705 of the ARRA.
Under the Agreement between NGP and Ormat, NGP will contribute its title and interest in Crump Geyser Project geothermal leases, technical and engineering data, existing permits and the benefit from the on-going Department of Energy (DOE) cost-share grant for exploration in relation to the Crump Geyser area. Ormat will fund 100% of the initial development activities of CGC in the amount of $15 million and pay NGP $2.5 million in installments over a three year period.
After the initial development expenses funded by Ormat are expended, the parties will each be responsible for funding their 50% share of costs; however, NGP has the option to borrow under a bridge financing facility from Ormat for all or part of NGP’s share of costs up to $15 million. Any bridge loans extended to NGP by Ormat will mature on the earlier of CGC obtaining third party non-recourse financing or upon achieving commercial operations, with an additional 90-day extension for any portion of bridge debt to be repaid from proceeds of the Treasury Cash Grant.
If either party to the agreement fails to make its pro-rata payment of an approved budget, the non-contributing party will be subject to customary dilution of its equity interest. If NGP is diluted, it will have an option to reinstate its 50% ownership position up to the date of commercial operation of the power plant. In no event will the NGP’s ownership interest be diluted below 20%.
If the parties elect to construct an expansion project, each party shall be entitled to participate with a 50% interest and dilution provisions will also apply except that NGP will not enjoy dilution protection with respect to expansions.
Ormat will be the EPC contractor for the power plant which will utilize Ormat’s proprietary generating and other balance of plant equipment. Ormat will be responsible for all development activities and will provide plant operations and management services to CGC.
Ormat has engineered and built power plants, that it currently owns or has supplied to utilities and developers worldwide, totaling approximately 1300 MW of gross capacity. Ormat’s current generating portfolio includes the following geothermal and recovered energy-based power plants: in the United State, Guatemala, Kenya and Nicaragua.
Nevada Geothermal operates the 49.5 MW Faulkner 1 geothermal power plant in Nevada and owns a 100% leasehold interest in five properties: Blue Mountain, Pumpernickel Valley, Edna Mountain and Black Warrior in Nevada, and Crump Geyser, in Oregon. These properties are at different levels of exploration and development. NGP estimates a potential of between 150 MW and 300 MW from its current leaseholds.
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